World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Wednesday, October 21, 2009

Sorry, but the American capital system is dead. Not dying, dead… sorry, it’s all over, the only part of it left is watching the show land on the rocks.

How did it get that way? Did you view FRONTLINE: The Warning? Bad math that was created and supported by fraud and deception in the shadow banking world. That world is still being hidden and supported today in an attempt to breathe never ending life into an impossible math situation. It was allowed to happen because those creating the false money were, and are, handing it out to politicians (babies) like candy. It will not succeed and has, in fact, already failed as it was always destined to.

Here’s someone who understands the bad math. His article is a great and simple read:

Jeff Nielson is correct, the math doesn’t work and all that’s left is the when.

And we can see the bad math manifesting itself in the charts. It’s not a pleasant thing to watch, really… a disgusting reality that can only be ignored for so long.

You want to see some bad math? Here it is:

Federal Receipts:

Federal Outlays:

Federal Deficit:

The nation’s debts are clearly experiencing a parabolic phase of exponential growth. All parabolic phases end in collapse as this one will too – it is very close to the end, and when it does end, ALL the markets will come tumbling down. They will tumble because the CONFIDENCE in your government will fail, and the confidence will fail because the math fails.

Good luck dismissing those charts or downplaying their importance – I’ll gladly debate anyone who wants to take the opposite position. While the bad math is quite apparent in those charts, the printing press is attempting to mask it over, and the dollar simply ratchets lower and lower destroying YOUR productive efforts. And so you will see this bad math manifest itself not only in the charts, but in the real world too. That’s why unemployment is skyrocketing with real unemployment now greater than 20% and a manufacturing employment that is smaller than it was prior to WWII.

To all the idiots who Obama has surrounded himself with (Larry Summers, Tim Geithner, Ben Bernanke, etc.), all I can say is that your days in office are numbered and there is a very special place in history reserved for all of you.

Where else has the fraud and deception of the shadow banking system manifested itself? Just about everywhere, let’s start with the banking system that believes it’s above the law, above math, and above common sense morals and ethics:

Get a load of what is happening to TOTAL BANK CREDIT, or as the chart states, Bank Credit of all Commercial Banks:

Yes, that is happening right now while the markets go higher, while the “experts” declare an end to the “recession.” Good luck with that, someone is ignoring reality, guess who it is...

The chart of Total Loans and Leases is just as bad:

But it’s not just credit that’s down, loans and INVESTMENTS at commercial banks are also now negative year over year:

And the lifeblood of our economy, small businesses, are being choked off from credit as well. Here are business loans, aka “Commercial and Industrial Loans at All Commercial Banks:”

Total Small Time Deposits are also negative:

And look at the plunge in non-Financial Commercial Paper, that would be commercial loans by NON-FINANCIAL companies – you know, REAL COMPANIES that actually produce a good or service for society – how quaint:

Of course the Treasury, aka “the Reserve Bank,” has grown their balance sheet in an attempt to mask over the collapse of the exponential bad math:

Their attempts to pump money and hide bad debts has resulted in the crash of the money multiplier which counters their efforts to “stimulate” the economy:

As the effects of the bad math manifest themselves through the banking system and through government, the real economy is simply whipsawed by their foolishness and game playing. The housing market, international trade, manufacturing… all are just along for the ride, that would include you:

Housing Permits:

Housing Starts:

Exports:

Imports:

Trade Balance:

Durable Manufacturing:

Capacity Utilization:

Retail and Food Service Sales:

Total Business Inventories:

And they are telling you that the “recession” is over? Uhhh, okay. They would mostly be the same people who see inflation. Unfortunately, they are the ones looking in the rear view mirror. Inflation is much, much different than a LOSS OF CONFIDENCE IN GOVERNMENT AND OUR MONEY SYSTEM. Inflation is an increase in the total supply of money and credit. What is currently happening is NOT inflation. Why is almost everybody WRONG? Because they do not see the destruction of CREDIT that is VASTLY larger than the attempts to print money. Take another look at the banking industry charts above. Yes, the money supply charts are up big time and they are in fact destroying our currency, but what is happening in TOTAL is that the supply of money and credit are falling. That has manifested itself in the PPI and CPI data, as trumped up as it is. The Fed reports PPI numbers all through the supply chain… none of them are positive with the exception of finished goods when BOTH food and energy are removed and it’s still pointed straight down. Keep in mind that finished goods are LAST in the supply chain and that raw materials are FIRST and thus still must work their way into finished goods and finally to the consumer (crude in these charts does not mean oil, it means Unrefined, again at the beginning of the supply chain). Here’s a sampling:

PPI Crude Energy Materials:

PPI Crude Foodstuff and Feedstuff:

PPI Crude Materials for Further Processing

PPI Industrial Commodities:

PPI All Commodities:

PPI Consumer Goods Excluding Food:

PPI Intermediate Energy Goods:

PPI Finished Energy Goods:

PPI Finished Goods:

PPI Finished Consumer Goods:

CPI all items minus Food:

Commodity inflation? Where? The only place you’ll find it is in gold and silver… both are not rising due to inflation, they are rising due to a loss of confidence in your government and in your money system. Yes, your politicians and bankers can and probably will destroy your money via the printing press, for that to happen, however, the printing must exceed the destruction of credit and we simply are not there YET.

I hope that you’re mad as hell, you should be. The markets are rising simply on pure speculation, that would include the current bounce in oil – demand for oil is still falling and raw crude oil is still oversupplied (in the short term). Deleveraging will continue, the fraud in the banking industry will also undoubtedly continue, but the math is the ultimate limiter – future income cannot possibly service the debt. Not at zero interest and certainly not at any interest rate that’s higher. Thinking otherwise is pure fantasy. Get ready if you are not already, the disconnect is historic, the divergences are historic, all that’s left is the landing, I hope you have good shoes on! Oh, and go long duct tape, the future need will be great: